California regulators Thursday conditionally approved a $3.5million settlement penalizing Southern California Gas for itshandling of the proposed sale and use of eminent domain powersrelated to one of its small, discontinued Los Angeles-areaunderground storage fields in the LA suburb of Montebello, CA. Thelarge utility company admitted no wrongdoing and is avoiding what,by its own admission, could be the substantially larger costs ofprotracted litigation.

Approved unanimously by the five-member California PublicUtilities Commission, the decision specifically leaves the dooropen for further regulatory proceedings related to rate-settingissues, noting that settlement parties, such as the CPUC Office ofRatepayer Advocates, “may challenge the reasonableness of SoCalGas’conduct in another proceeding.”

The CPUC’s decision, conditionally approves a settlement betweenSoCalGas, and the commission’s consumer services division, whichused a consultant’s report alleging varying misconduct by theutility as a means for halting its proposed sale of the MontebelloUnderground Storage Facility.

The CPUC decision changed settlement provisions calling forSoCalGas to pay its $3.495 million penalty to various publicinterest groups. Instead, the CPUC ordered that the lump sum bepaid using shareholder funds to the state’s general fund. It alsodirected the gas utility to expand the scope of itssettlement-imposed internal company ethics training “to address autility’s ethical obligations in exercising the power of eminentdomain.”

SoCalGas is required to offer to return mineral rights to theirprior owners and provide an environmental assessment without usingany utility ratepayer funds to do so. The prior owners are notrequired to return the proceeds of earlier sales to the utility.

“The settlement closes an investigation into whether SoCalGasprovided inaccurate information to the CPUC, misled propertyowners, or otherwise acted improperly in acquiring propertyinterest at Montebello,” the CPUC formal announcement stated.

The CPUC-commissioned consultant’s report concluded that whileSoCalGas (before, during and after) was applying Jan. 16, 1998 tosell the storage facility, it separately sought the use of eminentdomain in the courts (from 1996 through 98) to obtain the land andmineral rights ownership, arguing that they were needed forcontinued utility operations at the storage field.

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